Economy
Sacramento’s labor market strengthened further in Q3 2026, supported by the region’s diverse economic base and strategic position within Northern California’s distribution network. The Sacramento metropolitan area supports approximately 1.1 million jobs, and the unemployment rate declined to 4.8%, down from 4.9% in the previous quarter and 5.1% one year ago.
Demand
Industrial market fundamentals continued to improve in Q3 2026, with Sacramento recording 208,318 square feet (sf) of positive net absorption. This marked the second consecutive quarter of occupancy gains and brought year-to-date net absorption to negative 485,233 sf, as the market recovers some of the losses from the first quarter. Gains were broad-based, with eight of the market’s 13 submarkets recording positive absorption. Davis/Woodland led the region with 379,972 sf of net absorption, as Pacific Coast Producers occupied 399,535 sf at 2030 Hanson Way, nearly halving the submarket’s vacancy rate from 4.9% to 2.5%. West Sacramento (91,368 sf) and Power Inn (73,764 sf) also posted occupancy gains. These were partially offset by losses in Placer County (117,134 sf), Elk Grove (96,606 sf) and Metro Air Park (150,000 sf), where large blocks of newer space continue to face leasing challenges.
Leasing in Q3 was led by large deals, with all six key transactions exceeding 100,000 sf, matching Q2. Renewals and new leases split evenly at three each, though renewals accounted for 62.4% of the combined square footage. The largest deal of the quarter was Grocery Outlet’s 412,808-sf renewal, followed by the California Emergency Medical Services Authority’s 255,046-sf renewal, both in Power Inn. Peak Energy’s 183,088-sf lease at 7180 Badiee Drive in Metro Air Park, where vacancy closed Q3 at 20.1%, was the largest new lease. Another notable deal was Southland Industries’ 105,839-sf renewal in McClellan.
The prospect of future demand is supported by a sizable pipeline of active tenant requirements. There were 14 active requirements of 60,000 sf or larger totaling approximately 2.7 million square feet (msf) at the close of Q3. Warehouse/distribution users made up 64.0% of requirements by square footage with remaining demand spanning industries from building supply and automotive to food and agriculture. Manufacturers account for 29.3%. This indicates larger occupiers still evaluate Sacramento despite a selective leasing environment.
Supply
The vacancy rate declined for the second consecutive quarter to 6.4%, down 20 basis points from 6.6% in Q2, with total vacant space falling below 9.6 msf from a Q1 peak above 10.0 msf. The improvement came from direct space, which fell to 8.4 msf from 8.7 msf, while sublease availability held steady at 1.2 msf. Vacancy remains uneven across submarkets, with Metro Air Park the outlier at 20.1% and holding the second-largest pool of vacant space at 1.9 msf. Elk Grove, Davis/Woodland and Northeast Sacramento are the tightest submarkets, sitting below 3.0%. Space under construction totaled 2.0 msf with no completions during the quarter. Metro Air Park accounts for 61.9% of that total, making its lease-up a key swing factor for overall vacancy. Proposed projects are weighted toward 2027 (3.3 msf) and 2028 (3.9 msf).
Pricing
Average asking rents in Sacramento remained stable across all submarkets and asset classes. Asking rents for Class A warehouse space held steady at $0.80 per square foot (psf) per month across the region, while Class B warehouse space remained at $0.65 psf per month.
Although these rents remained level, some landlords are beginning to feel pressure to fill space and are offering concessions such as free rent, tenant improvement allowances and, in some cases, moving allowances to lease vacancies that have been on the market for over a year. These concessions are proving effective for some tenants, who were previously reluctant to relocate and inclined to renew but are now being incentivized to sign new leases and move their businesses.
Capital Markets
Industrial investment activity in Q3 2026 was shaped by the sale of a 28-property Natomas portfolio, which accounted for 60.8% of the approximately $398.8 million in sales volume and made headline totals difficult to compare with recent quarters. Blue Rise Ventures purchased the North Market Business Park from Link Logistics, totaling roughly 1.9 msf for $242.5 million ($128 psf). Link Logistics had also sold a 319,800-sf property at 550 North Pioneer Avenue in Woodland in Q2 for $28.5 million ($89 psf).
Sales averaged $110 psf, below the $125 psf in Q2 2026 and $127 psf in Q3 2025, while smaller infill buildings such as the 62,739-sf 3600 Industrial Boulevard sold for as much as $187 psf. With one sale dominating volume, psf pricing offers a more consistent point of comparison. Bulk and portfolio trades suggest investor appetite remains healthy despite leasing uncertainty.
